As stocks continue to sell off, it's important to stay cautious and wait for the market to display some form of renewed strength before buying shares. During these times, it can help to build a watchlist of stocks. Tracking the action of top mutual funds, it appears oil stocks are in favor.
In today's IBD Screen of the Day, we focus on the list off stocks that funds are buying. Because institutional investors are generally more sophisticated than retail traders, this can help gain insight into some of the next top stocks when market conditions change.
Some of the top names are oil stocks, although they sold off Monday.
Oil Stocks: Vermillion Energy To Report
Amid higher energy prices, funds have been accumulating Vermilion Energy. The oil and gas producer — based out of Calgary, Canada — will report first-quarter earnings after the market closes on Wednesday. According to FactSet, analyst expect earnings per share of $1.18 on sales of $584 million.
Vermilion Energy stock is forming a flat base with a 24.03 buy point. The oil stock sold off Monday amid a sector rout.
Archaea Energy is another fund favorite, boasting a high 72% mutual fund ownership rate, according to IBD MarketSmith.
After hitting a 22.11 buy point early in April, a breakout failed to hold up, and Archaea Energy hit a sell signal on Friday. While the stock did momentarily hit support at its 50-day moving average, shares have further plunged Monday, down more than 9% in afternoon trading.
More volatility could be in store because Archaea Energy will report its first-quarter earnings Tuesday before the market opens. EPS is estimated at 6 cents on sales of $65.2 million.
Offshore Driller Noble Increases Backlog
As energy prices spike, offshore drilling contractor Noble has been increasing production to take advantage of the hefty margins. When it announced first-quarter results on May 2, the company reported strong demand, with contract revenue of $195 million.
It announced a $700 million increase in backlog, bringing the total to $1.7 billion.
After six straight years of losses, Noble aims to regain profitability this year, with full-year EPS projected at $1.61. That's from a loss of 85 cents in 2021. The oil stock is forming a base with a 36.89 buy point.
Zim Shipping Outperforms But Displays Weakness
Shares of Zim Integrated Shipping are forming a cup base. The company has outperformed along with IBD's Transportation and Shipping industry group, which ranks eighth out of IBD's 197 industries.
But shares are breaking down, trading 11% lower in afternoon dealings and falling through the 50-day moving average.
The shipping company will report Q1 earnings on May 18. Analysts estimate earnings per share of $12.73.
